Groupama is pinning its hopes on Pierre Lefevre to revive its UK fortunes. He tells Andy Cook about the changes he has made

There are two versions of why Groupama failed to sell its UK insurance company last year. The official Groupama line is that the French parent saw an improving market in the UK and decided to back the hard market cycle. But rumours in the industry insist that Groupama's price tag, which started at £400m, was too high and that Groupama was forced into a corner after failing to secure a high enough price. Only a handful of people know which version is true. Whatever the reason, Groupama's future as a UK insurance company is based on the premise that it has to shake up its performance.

The French parent called off the sale in February after a year of talking to suitors such as Allianz and Churchill. Within a month chairman and chief executive Tony Lancaster had gone as had commercial lines managing director Stephen Hartigan.

A new team was assembled. Personal lines managing director Tim Ablett added the commercial lines portfolio to his responsibilities and Pierre Lefevre was brought in as chairman and chief executive from AXA's Netherlands operation. Within two months, Groupama announced its withdrawal from large commercial business.

Brokers , who had stuck by the firm throughout the uncertainty of its projected sale, were furious. With the big risk carriers reducing their exposure to large commercial risks, the last thing brokers needed was another market to disappear. According to Ablett, brokers now understand that Groupama had to make the move for commercial reasons.

So what happens next? Ablett can hardly contain his delight. Like a dog with a new bone, Ablett talks animatedly about plans and ideas. This is the chance he has been waiting for. Lefevre, seated alongside Ablett, is quiet and reserved, and seems to play the role of Ablett's conscience, monitoring and evaluating his drive.

Massive consolidation
Another reason for Lefevre's watchfulness, is that he has only been back in the UK for four months. For those with long memories, Lefevre was chairman and chief executive of AXA UK until 1997. So why did he come back? It wasn't size. Lefevre says AXA Netherlands was the same size as Groupama UK. However, Lefevre likes general insurance. "I like claims handling, personal injury claims and motor claims," he says.

And he sees the UK insurance market as one of opportunity. "The cycle over there is much less dramatic. The UK still has a cycle and lots of change. Compared with five years ago there has been massive consolidation," he says. "I can see the up cycle lasting for three to five years, now," says Lefevre. That's a handy figure seeing as the French parent has guaranteed backing for Groupama in the UK for a minimum of five years.

But with the equity market so low, how can Groupama turn better rates into profits?

"We sold 90% of our equity portfolio in April and invested in assets, gilts and corporate bonds," says Lefevre. "I didn't predict the downturn, we have been lucky," he adds.

While Lefevre and his team have been lucky with investments, his underwriting and claims departments have a struggle on their hands.

"We aim to achieve combined operating ratios of 95% across the board within the next couple of years," he claims. "We will not sacrifice profit for volume."

Is the target realistic? "In commercial lines, due to a couple of large claims this year, we're not there. But that said, the claims occurred in the segments that we have now pulled out of," says Lefevre.

He claims that fleet and private motor, which recently became a full-cycle EDI service, are just about hitting the target now, while household is not there yet. "It has not been a good year for claims in this sector so far," says Lefevre.

There are doubts in the market that affinity deals with banks, building societies and other brands cannot yield the top ranking ratio that Lefevre is aiming for.

But Lefevre is not about to change the Groupama intermediary only philosophy that has seen it do deals with Saga and others over the past few years.

One area where a combined ratio of 95% might be most difficult to achieve is the small to medium sized (SME) commercial market that Groupama is now focusing on. Most of the big risk carriers are also focusing on this market as they move away from bigger risks. And most of them have developed internet broking systems to improve their performance with brokers. While Norwich Union, AXA, Royal & SunAlliance, Zurich and Allianz have launched, or are piloting, e-broking for commercial lines, Groupama is still developing its system.

Lefevre realises that Groupama has to play catch-up and reckons that its system will be ready by the last quarter of this year.

Vast market
Lefevre is convinced the SME market is so vast that there is plenty of room even at current levels of competition.

Lefevre is astonished by the amount of regulation insurance companies are now facing

"It costs us a lot of money and it puts all the responsibility on the company's head."

So the strategy is set and, judging by the length of Lefvre's severely bitten nails, it has been a period of worry.

But Groupama still has the goodwill of brokers who need alternative markets and it has an award-winning fleet business. So perhaps Lefevre can look forward to a more relaxed few months.

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